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Understanding bankruptcy and credit impacts

On Behalf of | Mar 30, 2018 | Chapter 13 Bankruptcy |

Many people in Virginia are facing a daily crisis and financial struggle with the weight of overwhelming debt that may seem impossible to pay back. As late fees, interest charges and other expenses accumulate, these people may be looking for a solution or a way out from this landscape of debt. Bankruptcy can offer an alternative financial path, but many people are hesitant to approach this decision because of their concern for the future of their credit report and financial lives.

It is undeniable that bankruptcy has a substantial negative impact on a person’s credit report; for people who had decent credit, bankruptcy can cause a credit score to fall by 200 points or more. However, this credit score drop is temporary. In fact, not all bankruptcy information is even available on a credit report for 10 years; only a Chapter 7 bankruptcy filing persists on a report for the full decade. When people file for Chapter 13 bankruptcy, they enter into a court-supervised debt repayment plan. Chapter 13 bankruptcies may only affect a credit score for seven years.

In addition, by working hard to improve credit through using secured credit cards and other more easily obtained credit, a person going through bankruptcy can begin to make significant repairs to their credit score even while going through the process. It is possible for a person who filed for bankruptcy to obtain a good credit score within four to five years after filing.

Working with a bankruptcy attorney might help a person struggling with insurmountable debt to make the right decisions for their financial future. For some, a Chapter 13 plan may be an option, particularly if they make too much money to successfully complete a Chapter 7 bankruptcy filing.

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